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So Far, No Good: Why Modi Sarkar’s ambitious Smart Cities Mission is proving to be a damp squib

It has been over two years since PM Narendra Modi launched the ambitious Smart Cities Mission (SCM) amidst much fanfare, wherein Rs. 48,000 crore was said to be allocated by the Indian Cabinet for the development of 100 smart cities. Evidently, the initiative is now beginning to look increasingly flawed, not only in implementation but also in rationale.

Out of the initial allocation of Rs. 7,016 crore only Rs. 924 crore was reportedly spent overall, till February 2015. On that pretext, in 2015, the budgetary allocation for the project was reduced to a paltry Rs. 143 crore.

The underutilization of funds has been attributed to the slow progress in projects. For example, the top five cities – Bhubaneswar, Pune, Jaipur, Kochi and Surat – were expected to complete their proposed projects under SCM by 2021-22. However, all these cities have been lagging both in terms of projects completed and works-in-progress. Bhubaneswar and Kochi have not completed any projects so far. Pune has completed 4 out 34, Jaipur 7 out of 47 and Surat 7 out of 52. In many other cities, only preparatory work such as readying DPRs (detailed project reports) and inviting tenders has begun.

Earlier, the central governments would allocate funds for development, but the state government would sit on it while the time lapsed. Modi government, therefore, adopted the Smart City Challenge approach whereby cities compete and exhibit determination for change and the winning city is awarded funds for development as a Smart City. The state governments were also to make an equal contribution of Rs. 48,000 crores over a 5 year period. Apparently, Modi government’s rationale was that such a participatory policy would ensure the seriousness of purpose at the local level. Somehow, that has not seemed to work on the ground.

In September this year, in view of large unspent balances parked with various implementation authorities at an obvious cost to GOI, the Housing Ministry reviewed the completion of preparatory work under SCM in various states. With the exception of Faridabad, Udaipur and Jabalpur, the state governments had transferred neither theirs nor the centre’s share to the SPVs in most of the 60 cities selected last year.

SPVs or Special Purpose Vehicles, the entity set up to execute the SCM projects have allegedly been investing the parked money in sweep accounts to earn more interest. Sweep accounts automatically transfer money exceeding a certain limit into a higher interest-earning investment option such as fixed deposits. As a counter-measure, GOI has made it mandatory for Smart City SPVs to register with Public Financial Management System (PFMS). This is an electronic fund tracking mechanism to get real-time information on use of money across central schemes. However, only 58 SPVs have registered so far. As on October 4 this year, the PFMS for the smart cities mission shows that the SPVs have a closing balance of only Rs 1,797 crore, though the Centre released Rs 9,824 crore. Implicitly, most of the funds have not been transferred to the SPVs by the state governments yet.

The biggest criticism of the SCM rationale is that out of the total budgetary allocation, 80% of the funds are planned to be spent only on about 2.7% of the total area of a Smart City. Moreover, in an embarrassment to Modi government, Ram Vilas Paswan, Minister of Consumer Affairs, Food and Public Distribution, recently stated on record that building smart cities is not possible in India and it is going to be a big challenge for the Government.